The two most important things to check before buying a website
How to mitigate risk when buying websites
Buying and selling websites can be a profitable business for those who understand how to do it correctly and what to look out for. In my experience, I’ve seen hundreds of websites that looked great on the first sight, but when you look a bit deeper and check the 5 things I’m about to tell you, you’ll usually find out that the site is in fact not as great as it looks.
Who am I and why should you take my advice?
My name is Eric Mitchel Porat. I am an online entrepreneur with more than 10 years of experience, and one of my main activities is website flipping. Besides being the co-founder of three successful companies (one of which raised $11.5 mln in funding), I own a portfolio of more than 20 websites that generate passive income monthly. I started out as a simple webmaster, by creating my own website from scratch and eventually growing it to the stage where it was getting around 70,000 visits/month and was generating $300 (this was back in 2005 when it was harder to monetize traffic). I was approached by a person that offered to buy my website for 20 times more than it was making monthly, and that’s when I got interested in buying and selling websites. You can read more about my journey here.
Since 2005, I have acquired and sold more than 100 websites. I have made 49 transactions on Flippa, totalling $659,000.
Now that I’ve hopefully convinced you that I’m an expert in choosing the right websites to buy, let’s see what are the two most important things you should look at.
What are the maintaining costs/expenses?
Most webmasters focus on the revenue their website is generating, but revenue doesn’t mean profit. This is a mistake I’ve seen many beginners do, checking everything except the costs to maintain the website. There are many cases when a website actually costs more to maintain than the revenue it is generating, and that is completely fine, as long as you as a buyer are aware of that and willing to take this risk.
So, how do you find out what is the exact amount of money you will have to spend on the website?
Ask the correct questions!
While most sellers will tell you their expenses straight away, you should always try and get them to tell you all the details. You should find out what exactly are those expenses, who are the providers, and ideally have the webmaster show you their website-related transactions for the last three months.
Here are some common expenses and related questions to ask:
- Hosting and domain - Who is the provider? Can you send me a screenshot with the monthly/yearly cost?
- Content / copywriters - How many copywriters do you have? How many articles/products/pages are you publishing per month? How much do these copywriters charge? Can you share their details so that we keep working together?
- Content managers / VAs - How many content managers / VAs do you have? How much do they charge? Can you share their contacts?
- Developers - Does the website need ongoing technical support? How often do you have to hire developers to help? What was the last technical problem on the website?
When talking about maintaining costs, keep in mind that your time is a valuable resource too and it should be considered as an expense. Don’t forget to ask the webmaster about the amount of time needed for the website weekly / daily. The amount of time needed is usually directly related to expenses i.e. the less work is delegated - the more work you will have to do yourself.
Where is the traffic coming from?
This is the second most important question I ask myself and the seller before proceeding with buying a website. While it may not seem like a big deal, if more than 90% of the traffic comes from one channel (e.g. Social Media), the risk of losing it is higher. Most of the websites are getting most of their traffic from one channel, usually the channel that the webmaster has mastered. The bigger the website and the traffic, the more diversified the traffic should usually be.
Before buying a website, make sure to have the percentage of where the traffic is coming from. Here are three different scenarios and their pros and cons:
>85% of traffic comes from one channel
This is the riskiest case, depending on the traffic channel. SEO and Social Medias tend to be the riskiest, because you can’t directly control your visibility on these channels.
- Opportunity to diversify and increase traffic
- Possibility to drive the price down a bit because of the higher risk
- Risky, if a Google or Facebook update hits you negatively you could lose most of the traffic and revenue
70% to 85% of traffic comes from one channel
This is not an ideal percentage, but that’s the best you’ll usually see, just because small websites focus on one traffic channel usually.
- Not as risky as the previous example
- Opportunity to further diversify and increase traffic
- There are no cons in regards to the traffic channels, this is the best you’ll get in most cases
<75% of traffic comes from one traffic channel
Having such a diversified traffic usually means that there are extra costs involved for hiring specialists or building expertise yourself.
- Low risk
- Brand recognition across multiple channels
- Higher price because of the little risk involved
- High maintaining costs (time or money)
- Not as many opportunities to increase traffic
Hopefully this article has given you a bit more context around website flipping, While the two things to check above are some of the most important for me, there is a lot more to auditing a website before buying or selling.
Feel free to reach out to me on social media (just search for my name, Eric Mitchell Porat) and ask any questions, I’ll be happy to help you!
About the author
I'm an online entrepreneur, investor, and website flipper with more than 10 years of experience.
I have co-founded three successful companies, one of which raised $11.5 mln in funding.
Owner of Droidviews.com and more than 20 other websites